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Preventing Illegal Exports: Learning from Case Studies

by David Albright

April 6, 2001

The Schaublin SA referred to in this article is the former Schaublin SA group of companies and does not refer to the current Schaublin SA of Delemont, Switzerland, maker of collets and tool holders, and which is a wholly owned subsidiary of RBC Bearings Inc. Many countries have sought overseas assistance in their efforts to build nuclear weapons. Few proliferant states have been able to go it alone in this quest. They have had to acquire key equipment, materials, and technology. Foreign assistance takes many forms. It includes government assistance, both direct and tacit. Companies have exported important items for nuclear weapons programs both legally and in violation of national export control laws. Governments may indirectly encourage illegal, or at best questionable exports, by ignoring, or turning a "blind eye," to a proliferant's procurement efforts, or by having an ineffective or chaotic export control system. Individuals have acted as procurement agents, middlemen, or sources of sensitive information. The amount of foreign assistance required by a particular proliferant state has varied widely, depending on its technological level and the particular technology chosen for making nuclear weapons. In general, the pursuit of uranium enrichment technologies has required more foreign assistance than the pursuit of technologies to separate plutonium from irradiated fuel. The level of assistance received by a state has depended on its procurement skills and the effectiveness of supplier states' or international export controls. One also cannot ignore the role of chance in locating acceptable suppliers willing to break or bend the law. Looking at the historical record, proliferant states have acquired many types of nuclear facilities through procurement. In some cases, states have obtained complete nuclear facilities. In the 1950s and 1960s, France provided Israel with both a reactor and a plutonium separation plant that became the heart of its nuclear weapons program. France later provided Iraq with the Osirak research reactor that Iraq planned to use to make plutonium covertly. Proliferant states have obtained an astonishing number and variety of sensitive components of uranium processing facilities, uranium enrichment plants, and other fuel cycle facilities. Countries have also obtained sensitive information about a wide variety of nuclear activities and facilities. Of all the countries that have illicitly sought nuclear weapons, only Iraq has described in detail the methods it used in the 1980s to procure a wide range of items for its nuclear weapons program. Following the Persian Gulf War the UN Security Council forced Iraq to dismantle its nuclear weapons program, other weapons of mass destruction (WMD) programs, and intermediate range ballistic missiles programs. Part of this process was a multiyear effort by the International Atomic Energy Agency (IAEA) Action Team to understand Iraq's nuclear accomplishments and failures prior to the Gulf War. It obtained procurement information from Iraq and systematically checked it against supplier, commerce, and intelligence records. Because of the Action Team inspection effort and parallel public and legal investigations into illicit procurement, a considerable amount of public information exists about Iraq's procurement activities in the 1980s. No other country has provided such a look at its secret procurement strategies. However, information exists about other countries' efforts, although it is in general not as complete as the Iraqi information. Based on available information, countries have been remarkably persistent in violating the letter or the spirit of export control laws and regulations, often with the active assistance of middlemen or corporate officials. Proliferants have proven that they are willing to devote considerable resources to obtaining items overseas. A recurring failure of the supplier nations has been to underestimate the determination and capabilities of proliferant states. In the West, specific export loopholes were closed only following a major scandal, such as occurred after Iraq's procurement efforts were exposed after the Persian Gulf War. Vigilance, particularly among corporations, is often short-lived. Creating a sustainable export control "culture" remains one of the most difficult challenges in supplier states.

Obtaining Foreign Assistance

Proliferant state's procurement efforts have involved many strategies and methods. In the last two decades, proliferant states have had little success in acquiring complete, sensitive fuel-cycle facilities, such as reprocessing and uranium enrichment plants. Thus, they have focused on acquiring parts, drawings, and the materials to make nuclear facilities. Any foreign acquisition attempt involves many steps. The process of obtaining a clandestine nuclear facility piece-by-piece can require a sophisticated procurement network. Aspects of a successful procurement effort may include:

• The recruitment of individuals and companies as agents or trusted sources of technology and key items;
• The acquisition of education, training, and know-how;
• The establishment of off-shore, "front" companies;
• Knowledge of middlemen;
• The creation of overseas bank accounts, which may issue letters of credit;
• The establishment of shipping and transportation networks;
• The maintenance of adequate secrecy;
• An understanding of the strengths and weaknesses of national export control regulations and laws; and
• Creation of false end-user statements, sometimes through the cooperation of a third country and the use of off-shore agencies.
• To better understand methods used to acquire items overseas, case studies are discussed. The case studies seek to illustrate several of the specific bullets mentioned above and the general techniques used by proliferant states to seek items for their nuclear weapons programs. The case studies will in some case overlap.

Case Study 1: Devising a Strategy

Countries spend a considerable amount of time developing strategies to acquire nuclear technologies. Iraq's secret gas centrifuge enrichment program in the late 1980s illustrates a program that understood its need for foreign assistance to acquire a gas centrifuge plant, and it developed a strategy accordingly. The Iraqi centrifuge leaders realized early that they lacked the capability to manufacture components for a modern Western gas centrifuge to the required accuracy.1 Centrifuges spin at high speeds, and their manufacture place high demands on a country's industrial capabilities. Yet, the Iraqis wanted to reach a point relatively quickly where they could operate a small cascade of centrifuges. As a result, the Iraqi program set the objective of acquiring sets of components for 50 gas centrifuges from European companies, procuring the industrial infrastructure to be able to make centrifuges domestically, and obtaining sensitive raw materials and parts sufficient to make a few thousand centrifuges. Obtaining large numbers of parts overseas depended on having component designs early in the program. These designs were obtained with the help of foreign gas centrifuge experts. The Iraqis recognized that these parts could become obsolete as the centrifuge program developed. However, they were more concerned that they would be unable to get the items later. In contracting for the construction of the components for the 50 prototype centrifuges, Iraq provided drawings of individual components to four suppliers, C. Plath and RO-SCH in Germany, Matrix Churchill in Britain, and Schaublin S.A. in Switzerland. Iraq had ordered machine tools from some of these companies, and the components were requested as samples to check the output of a specific machine tool. In other cases, the company received a drawing of a specific component and made the part.

Case Study 2: Recruiting Trusted Foreign Individuals or Companies

Iraq's gas centrifuge experts have said that their method to obtain assistance from foreign individuals and companies was based on patience and persistence. According to an Iraqi centrifuge expert interviewed in 1993, when seeking the assistance of a person, the strategy is to "feel your way, test his credibility and knowledge, and build up confidence." Before committing to a larger project, he added, "ask him to make a few samples, and then a few more." To pursue his strategy, he said, "you must know a lot yourself." In summary, he stressed that one has to "take guarded steps and never enter into an immediate contract." One Iraqi tactic was to involve the targeted supplier first in legal but lucrative trade. Once confidence is established, the supplier may be more willing to help with illicit or questionable exports. At least, the supplier will be more likely to reveal how far he or she is willing to go in supplying items without revealing the true intentions of the end- user. If a financial dependency can be created, the supplier may find it difficult to say no to a questionable export. Iraqi procurement agents in the late 1980s were often willing to provide enormous sums of money to a company that Iraq was interested in recruiting. This type of recruiting technique worked extraordinarily well with small companies. For example, the German firm H&H Metalform obtained a 27.4 million Deutsch Mark (DM) contract in 1987 to make specialized "flow-forming" machines to make thin steel tubes for Iraq's ballistic missile program.2 Of this amount, seven million DM were profit. (Later, H&H would agree to provide a machine tool to make maraging steel rotors for the Iraqi gas centrifuge program.) This contract was huge for a firm of only seven people. In 1984, H&H's total annual sales were about one million DM. The joint owners of the firm figured that with such a large and profitable contract in hand, a bank would loan them the money to make the machine tools. However, the banks said no. Dietrich Hinze, one of H&H's owners, approached Safa al Haboby, the Iraqi who offered the contract and was the powerful head of the Nassr General Establishment, a complex that was responsible for armament technology procurement, located at Taji, about 80 kilometers northeast of Baghdad. Hinze told him that H&H would have to refuse the contract. Haboby responded that H&H's offer was 12 million DM cheaper than that offered by H&H's competition, Leifeld & Co. "How much money do you need," he said. Hinze replied that he needed 5 million DM. After conducting an audit of H&H's worth, Haboby said that H&H could borrow 5.5 million DM for ten years, but the Iraqi company, Al-Arabien Co. Ltd., a subsidiary of Nassr, would own half of H&H during that ten-year period and share equally in the profits. Hinze was amazed by the deal, because he knew it would almost certainly lead to more contracts with Iraq. He agreed, and within days H&H had 5.5 million DM in its account. Soon afterwards, Iraq reduced the principal to 3 million DM, and H&H had 2.5 million DM in profit before they made a single machine. The Iraqis were good, correct businessmen. Although Iraq owned 50 percent of H&H, they never tried to influence the company. Once a year, Haboby came for the meeting of the shareholders and expressed trust and faith in the management of H&H. H&H provided many services to Iraq in addition to its flow-forming machines. It provided components for SCUD missiles, facilitated meetings between Iraqis and German centrifuge experts and other companies, and acted as an Iraqi agent in acquiring other types of machine tools and furnaces for the gas centrifuge manufacturing program. The enormous profits continued until Iraq invaded Kuwait in August 1990. In the end, H&H received Iraqi business worth about 40 million DM for machines and about 16 million DM in commissions.

Case Study 3: Acquiring Education, Training, and Know-how

A state that wants to build nuclear weapons must acquire a wide range of technology or "know-how." Even a relatively developed state, such as South Africa, acquired know-how abroad. A state such as Iraq depended heavily on overseas procurement of know-how. A nuclear program must have adequately educated scientific and technical personnel. To acquire the basic expertise needed for a nuclear program, many states have sent abroad students and professionals for undergraduate, graduate, and post-graduate education. Many Iraqis who later became important in the nuclear weapons effort received their education in the United States, Britain, and Germany. Acquisition of sensitive know-how can occur by procuring drawings and documents, having oral discussions with experts, attending training sessions conducted by companies or institutes, or undergoing training associated with the purchase of equipment. Specialized Training. Specialized training courses can be particularly helpful in gaining an understanding of fields related to nuclear weapons programs. For example, a country must master many technologies, including those associated with vacuums, instrumentation and control, heat transfer, material science, and welding. Although these courses may not be sensitive by themselves, they can contribute significantly to a proliferant state's understanding of sensitive information. In addition, if the courses are taught at organizations or companies that are involved in sensitive technologies, the participants may have opportunities to acquire sensitive equipment or technology. In 1989, 22 members of the Iraqi gas centrifuge program took a course at the German firm Interatom, which also built gas centrifuge enrichment cascades for Urenco, the European gas centrifuge company. The participants actively sought to deceive Interatom about their true purpose. Surreptitiously, an Iraqi obtained entrance into a cascade hall containing piping and valves where he was able to copy sensitive piping and valve arrangements for gas centrifuge cascades. From a brochure advertising the course, another Iraqi was able to determine cascade piping arrangements. Iraq picked Interatom because of its expertise in uranium enrichment cascade technologies. However, in their discussions with Interatom representatives, Iraqis were careful to hide their true intentions. For example, when the goal was training in "cold traps" for uranium hexafluoride, the Iraqis asked Interatom about cold traps for some other material. When asking for training in vacuum technologies at Interatom, the Iraqis asked for vacuum regions far lower than that inside gas centrifuges, knowing full well that Interatom knew mainly about the pressure region experienced in a gas centrifuge. After Interatom officials told them that they could only offer vacuum training in this other region, the Iraqis feigned disappointment, and said, "we will settle for that." In one case, a suspicious Interatom official came to one of the Iraqi leaders and said that his colleagues were asking sensitive questions. Alarmed, the Iraqi went to his colleagues and told them to be more careful. A senior Iraqi centrifuge expert also received training from the U.S. firm Mechanical Technology Incorporated (MTI) on the use of computer programs that calculate rotor dynamics and stability, and that are useful in designing bearings. MTI had also been involved in the U.S. gas centrifuge program prior to its cancellation in the mid- 1980s. This senior Iraqi also visited the University of Virginia, and met with personnel at the Rotating Machinery and Controls (ROMAC) consortium. The Industrial Projects Company (IPC), which was in reality a Baghdad-based procurement company for the Iraqi gas centrifuge program, joined ROMAC in 1989. It is unclear if the Iraqi benefited from his visit to the university, or by IPC's membership in ROMAC. Equipment or Technology Demonstrations. States have gained valuable knowledge when companies present their equipment or software to a prospective customer. Many companies have included sensitive information or items in their demonstrations. For example, the German company Leifeld made a demonstration of its flow-forming equipment in Iraq, anticipating a sale. Leifeld showed Iraq a video containing sensitive information about producing maraging steel rotors for a gas centrifuge. When Karl Heinz Schaab, the German gas centrifuge expert, laid out his products at his company ROSCH in Kaufbeuren to a visiting Iraqi delegation, he included a highly sensitive carbon-fiber centrifuge rotor. When a U.S. high explosive expert visited South Africa to demonstrate his latest software to a civilian company in South Africa, he was unwittingly caught in an effort by South Africa's nuclear weapon program to acquire assistance. Without him knowing, the South African group included a member of South Africa's nuclear weapons program, which was the true end-user interested in purchasing this U.S. software. Technology Transfer as Part of Hardware or Software Acquisition. Often the supply of equipment or software has been accompanied by training in the use of the supplied item. For example, the supplier may train personnel to operate the equipment at its factory or in the proliferant country after the equipment has been installed. Schaab was involved in an agreement by the Swiss company Alwo to provide the Iraqi gas centrifuge program with a carbon fiber winding machine. Schaab agreed to program the machine to make carbon-fiber centrifuge rotors. He anticipated spending several weeks in Iraq after delivery of the machine to do the programming. Iraq's invasion of Kuwait and the subsequent international sanctions on Iraq prevented Iraq from receiving this machine. Members of Iraq's weaponization program benefited from overseas training associated with the purchase of equipment. Iraqis received training on the construction of flash X-ray machines in Sweden. They received training from the British company Hadland Photonics on high speed photography, and from the Japanese company Hamamatsu on the operation of streak cameras. These are but a few examples.

Case Study 4: Off-shore companies

A common strategy has been to use off-shore companies that purchase equipment, materials, or technology under a civil cover, and then ship these items to the proliferant state. These companies may be just a post office box or a major institution involved in producing many items in their own right. In some cases, the companies were owned in whole or part by the proliferant country. In a June 22, 1999 interview in the Egyptian newspaper Al-Ahram, A. Q. Khan, the father of Pakistan's gas centrifuge program, said that his program depended mainly on purchasing items for the gas centrifuge program through a number of off-shore front companies, including companies in Japan and Singapore. He added that these other companies "purchased the equipment and supplied it to us for additional commissions ranging between 15 and 25 percent of the original price."

Case Study 5: Acquiring Nuclear Weapon Manufacturing Equipment

In 1987, Iraq decided to build a set of facilities that could make nuclear weapons out of highly enriched uranium (HEU). Although Iraq had started an illicit program to make HEU in 1981, it had been slow in starting the nuclear weaponization process itself. Iraq developed a list of needed items for its weaponization program by studying declassified information from the U.S. Manhattan Project. Because of uncertainties about both the accuracy and completeness of this information, Iraq planned to conduct an extensive testing program of each major component of an implosion fission device. Iraq selected a weaponization site roughly 100 kilometers southwest of Baghdad, which is the Al Atheer site destroyed by the IAEA Action Team in the early 1990s. To obtain the necessary equipment for the site, Iraq decided to shop overseas. The Iraqis were well aware of how hostile international reactions could be to an Iraqi nuclear weapons effort, and planned to proceed in secret. Ali Abdul Muttalib, the Iraqi commercial attach in Bonn, received a list of equipment from the nuclear weapons program. Ali, who was a key European coordinator for Iraqi procurement, made initial contacts with several German companies. They responded with many questions about the purpose and specifications of the desired equipment, and said that this equipment was sensitive, requiring export licenses. Because of the complexity of the questions, the attach suggested that Iraqis from the weapons program should negotiate directly with the companies. Khidir Hamza, then the head of the Iraqi weaponization program, led a delegation to Germany in August 1987 to conduct negotiations for a wide variety of items for the weaponization program under the pretense of non-nuclear cover stories. The main item sought by Hamza's team was equipment to process natural uranium and HEU into nuclear weapon components. For these items, Ali had approached Degussa and Leybold, who were not only interested but were among the best companies within the European Community for these items. Because Hamza had represented Iraq at the meetings of the IAEA, he could not risk being linked to procurement efforts that claimed to be for non-nuclear purposes. With Hamza kept out of sight, two of his aides met with representatives of Degussa and Leybold in the Iraqi embassy to discuss the acquisition of a foundry. Iraq told the Germans that the foundry would be used to melt, purify, cast, and machine tungsten, a common refractory metal. The Iraqis never mentioned that the actual planned use for the foundry was to process both natural uranium and HEU. The equipment would include vacuum induction furnaces, crucibles, computer-numerically-controlled (CNC) machines, and an iodine-based purification process. Initial estimates put the equipment for the foundry over $100 million. Buildings and personnel training were not included in these rough estimates. Hamza summarized the reaction of the company representatives: "During the negotiations, we suddenly realized that the companies were willing to sell these technologies to us. At the same time, they warned us they were complicated, expressed astonishment that we were entering such a field and indicated that the cost would be high. At first, this move on the part of the companies was puzzling for us, since it seemed the companies were prepared even to disregard the requirement for an export license by making special arrangements and packing the equipment under covers, which made the export process seem natural. At the same time, they stated openly that they knew the purpose of the equipment. They even indicated that they knew the equipment was not for peaceful purposes. We were astonished to see that the companies were actually helping us find covers for some of the required technologies." The behavior of the Germans startled Hamza's team. They concluded that the companies either had already obtained permission from the German government to agree to provide a foundry to Iraq or just wanted the huge sums of money involved in such a deal. If the former case were true, then the Iraqis believed that the companies could be acting as spies for Western intelligence agencies. Many Germans would need to visit Al Atheer during the construction phase of the project, enabling them to discover the extent of the nuclear weapons program, its location, and the Iraqi personnel involved. On the other hand, Leybold officials had said that they were having financial difficulties. Hamza later accepted this latter view. Ali attended some of these meetings, which helped convince the company representatives to take the offer seriously. Because the preparation of a bid is time- consuming and expensive, the Germans wanted assurances that Iraq was serious about acquiring a foundry. Iraq received the final bid from the companies several months later. The foundry would cost about $120 million. For $200 million, the companies would supply a "turn- key" facility including process buildings and equipment. In the end, Iraq declined the bid. After Hamza reported back home that the Leybold and Degussa representatives had seen through Iraq's cover story, his superiors and colleagues were upset. Confronted with the escalating projected cost of the entire weaponization project, which was over $1 billion by this time, Saddam Hussein ordered a review of the entire project, including the bid from Leybold and Degussa. The reviewers, who included other senior nuclear officials, branded the foundry project "another Osirak," the French-supplied reactor bombed by Israel in 1981. They said that the location of Al Atheer would be exposed to Germany and eventually the rest of the world, because it would not make sense to keep a foundry location secret. The team sent to Germany suffered reprisals. One of the Iraqi negotiators was jailed. Partly as a result of this trip, Hamza gave up his position as head of weaponization. After 1989, Iraq used the bid as a guideline to procure equipment for a foundry piecemeal from several countries. It also used the design of the foundry supplied by the Germans to design its uranium processing facility at Al Atheer.

Conclusion

These case studies provide a window into how proliferant states seek to acquire sensitive items for nuclear weapons programs. They also highlight the importance of ensuring adequate and realistic export controls on nuclear and nuclear-related items. Critical to the successful implementation of export laws and regulations is an adequately staffed and funded export licensing bureaucracy, backed by a central government strongly committed to the implementation and enforcement of export controls. This bureaucracy must acquire a deep understanding of the capabilities and products of domestic companies and establish an effective working relationship with domestic companies. Companies for their part need to develop an adequate set of internal policies and rules that minimize the chance of questionable or illegal exports. They must develop and maintain a culture supporting effective export controls. Too often overlooked is the critical role technically competent experts can play in the success of a proliferant state's nuclear weapons program. The information they may provide about sensitive technology, key suppliers, "tricks of the trade," or ways to overcome bottlenecks in a project can determine the success or failure of a nuclear weapons program. An expert can provide this assistance without leaving home. Export controls thus need to regulate such transfers of specialized, sensitive information. Many German companies were highly embarrassed by the revelations about their exports following the Persian Gulf War. Individuals were arrested, and some were jailed. This embarrassment led Germany to dramatically tighten its export control system. One legal reform required companies to create stringent internal export control systems that would make it significantly harder for company executives to pursue business with potential or actual nuclear weapons programs. Notes *Presented at the following conferences: (1) "Non-Proliferation, Nuclear Security and Export Control: Lessons and Challenges," sponsored by ISIS and the Center for Export Control, Moscow, April 19-20, 2001, and (2) "International Seminar on Export Controls and Nuclear Proliferation," sponsored by ISIS and the Export Control Laboratory of the Institute of Physics and Power Engineering, Obninsk, April 23-24, 2001. [Back to the top] 1The Iraqi centrifuge experts were apparently unaware in the late 1980s of the Russian centrifuge program. 2About $12.5 million, at a 2001 conversion rate.